U.S. citizens can now purchase physically settled Bitcoin futures contracts using LedgerX’s Omni platform. What does this mean for Bitcoin price?
If You’re Not First You’re Last!
On Wednesday BTC derivatives provider LedgerX revealed that it had launched physically-settled Bitcoin futures contracts. This makes the company the first to offer such a product in the U.S.
This also catapults the company to the forefront, ahead of Bakkt, TD Ameritrade-backed ErisX who are both direct competitors.
The product is available to all U.S. residents, institutional and retail. Interested investors simply need to complete the know-your-customer (KYC) verification and then they are cleared to trade.
According to LedgerX CEO Paul Chou, this is possibly the first instance where a regulated company permits investors to deposit BTC as collateral.
As a result, investors do not have to wait for bank transfers or any other time-consuming delays that are part and parcel of the U.S. banking system.
Physically-backed Bitcoin Futures will Change Everything
Chou said that this is revolutionary because if “somebody that deposits bitcoin, [will] not have to use the U.S. banking system at all. That’s why physically-settled is very important. I think [it’s] one of the most unique use cases for Bitcoin where you’re using cryptocurrencies as the only collateral.”
Chou also pointed out that “Bitcoin trades 24/7/365 and our customers expect that from us, so if you trade Sunday night, the banking system did not have to be open.”
Retail investors can trade the Bitcoin futures contracts via the company’s recently launched Omni platform. Meanwhile, institutional clients can trade on LedgerX’s other products.
Physically-settled futures contracts mean customers will actually retain custody of the Bitcoin they place bets on at the expiry date instead of receiving the settled amount in cash. Investors are not required to purchase the contracts using the U.S. dollar as they can be ordered with BTC.
According to John Todaro, the director of research at TradeBlock, physically-settled Bitcoin contracts will make it easier for investors to accurately hedge their bets and the product will be useful for non-speculative institutions.
Chou further clarified that:
Not only are they delivered physically in the sense that our customers can get Bitcoin after the futures expires, but also they can deposit Bitcoin to trade in the first place. Cash-settled is cash-in and cash-out, we’re Bitcoin-in and Bitcoin-out.”
LedgerX first revealed the product in April after filing with the U.S. Commodity Futures Trading Commission (CFTC) in November 2018. LedgerX received a designated contract markets (DCM) license last month.
Meanwhile, Bakkt awaits approval of a trust charter from the New York Department of Financial Services and if granted the platform could launch as soon as a few weeks.
ErisX, which is backed by TD Ameritrade has already received CFTC approval but has yet to reveal when it will launch futures contracts.
Investors are now curious about how the debut of LedgerX BTC futures and the imminent approval and launch of Bakkt will impact Bitcoin’s price.
Do you think physically-settled Bitcoin futures contracts will lead Bitcoin price to rally in the near future? Share your thoughts in the comments below!
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